Filed under: Deals, Industry, US Airways Group (LCC), UAL Corp (UAUA), Delta Air Lines (DAL)
Reading the paper everyday means seeing a headline that another airline merger is in the offing. The most current wave of articles is on a United Airlines (NASDAQ: UAUA) merger with US Air (NYSE: LCC). It is yet another example of two carriers hoping that they can get together and save costs, without alienating customers in the process.
According to The Wall Street Journal, “The companies have identified more than $1.5 billion in potential cost savings and revenue enhancements from joining forces.” The word “potential” is the key.
Airline employees who are in unions have a good chance of shutting down a merged airline if they think they will loss a ton of jobs. Pilots, flight attendants, and mechanics all have plenty of leverage. A combination of United and US Air would have almost $10 billion in revenue a quarter. It wouldn’t take a very long strike to eat through $1.5 billion of that.
The number of pending mergers is also almost certain to get some of them canceled by The Justice Department. Members of Congress who have employees on airline payrolls are also likely to take a position. This day, the US has at least five major carriers. If Delta (NYSE: DAL) and Northwest (NYSE: NWA) get married, that cuts consumer choice down by a lot.
Don’t count on a United hook up with US Air. It is not likely to happen.
Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.
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